Austria's heavyweights begin coalition talks
* Eight working groups to tackle policy differences
* Big parties' popularity waned over bickering, bailouts
* Finance Minister Fekter's role under scrutiny
By Michael Shields
VIENNA, Oct 15 (Reuters) - Austria's weakened political heavyweights began talks on Tuesday towards forming an effective new government to build a united front against the revitalised far right.
Chancellor Werner Faymann's Social Democrats (SPO) and the conservative People's Party (OVP), the centrist pro-Europe blocs that have dominated postwar politics and governed together since 2006, only just managed a joint majority in voting on Sept. 29.
As recently as the 1980s, the two parties got a combined 90 percent of the vote, but with the eurosceptic Freedom Party (FPO) breathing down their necks, the establishment parties now need to prove they can bridge policy differences and forge cohesive plans to preserve the Alpine republic's prosperity.
The SPO has said all along it wants the OVP as its partner for the next five-year term, while the conservatives have left open the option of leading a centre-right government.
Such an alignment would likely require them to work with the FPO and the eurosceptic party of Austro-Canadian car parts billionaire Frank Stronach.
Both these parties want to break up the euro, tapping discontent over using Austrian wealth to prop up euro zone laggards such as Greece. The FPO also draws on anti-immigrant and anti-Islam sentiment.
The negotiating teams of Faymann and conservative leader Michael Spindelegger now start work on eight policy areas, hoping to wrap up the talks by late December.
Faymann hailed what he called a constructive relationship with Deputy Chancellor Spindelegger. "After the election is a good chance for us to show together how it really is," he told reporters after a meeting of the caretaker government.
"Elections are like hurricanes. They come and go. Now it is a matter of constructive negotiations," added Interior Minister Johanna Mikl-Leitner of the OVP, who had labelled Faymann "the liar chancellor" during a campaign loaded with personal attacks.
The Social Democrats campaigned on protecting jobs and pensions and shoring up public finances by slapping a wealth tax on millionaires. They want to help working people by adopting a minimum wage and to prolong a special levy on big banks' assets.
The OVP has vowed to block new taxes, opposes a minimum wage and wants companies to be able to ask staff to work longer hours at busy times. The parties are split over reforming an education system that underperforms those in other developed countries.
The eight working groups need to hammer out joint positions and timetables for implementing policy before the parties can agree to form a new government.
That means the 2014 budget is on hold for now, as is a plan on how to restructure ailing nationalised lender Hypo Alpe Adria , whose need for more state aid threatens to blow a hole in the country's finances.
Spindelegger played down the fact that outspoken Finance Minister Maria Fekter was not heading the OVP negotiating team on public finances, which fuelled speculation she would not keep her post in a new government.
"You cannot infer anything from this," he said. Fekter took no questions from reporters as she entered the cabinet meeting.
Analysts expect the two big parties to join forces again, but Wolfgang Fellner, publisher of the Oesterreich tabloid, commented that a centre-right coalition of the OVP, FPO and new liberal party Neos was not as far fetched as some might think.
The Neos say they would not join a coalition that includes the FPO given huge differences over Europe and foreigners, but Fellner wrote "the Neos' 'no' ... will probably last seconds as soon as they are invited to help govern". (Editing by Alison Williams)
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